Unilever and Nestlé Publish Detailed Supplier Lists

In February Nestlé and Unilever both published a list of all their direct and indirect palm oil suppliers and mills. These two consumer goods companies are major players in the global palm oil industry, and purchase about four percent of palm oil production globally. Most of the larger palm oil traders and refiners, such as Musim Mas, often suppliers to Nestle and Unilever, had already published similar lists.

Unilever CEO Paul Polman telegraphed this move earlier in the year in a speech at the World Economic Forum in Davos, saying that:

“A lot of people think if you outsource your value chain you can outsource your responsibilities. I don’t think so. We need to be at the forefront of change. This is why Unilever is committed to greater transparency and continue to work with our partners to drive positive change in the palm oil industry.”

Unilever and Nestlé’s move represents a significant increase in transparency in the palm oil supply chain, as downstream consumer goods companies had never before provided such level of detailed information on their supply chains. By fully disclosing their supply relationships, Unilever and Nestlé set a trend that may push the remaining companies in the USD 62 billion palm oil sector to follow suit. For both companies it is now more difficult to maintain trade relations with growers that continue to deforest or clear peatland.

A closer look at the supplier lists shows some notable differences between the two companies. Whereas Unilever provides details on the locations of each mill in its supply chain, it does not distinguish between direct and indirect suppliers. Direct and indirect suppliers are tier 1 and tier 2 suppliers – companies that sell to tier 1 suppliers. Nestlé provides greater insights in the indirect supply relations as it indicates through which trader/refiner it is linked to each of the mills. Its list thereby provides insights in the supply chains of traders who did not publish their own supplier lists to date.

Unilever’s and Nestlé’s further contribution to the transformation of the palm oil sector relies on the actions they take to address cases of No Deforestation, No Peat, No Exploitation (NDPE) non-compliance, such as suspending repeat offenders. In 2017, Unilever suspended purchases from Sawit Sumbermas Sarana over NDPE non-compliance, following Wilmar, Apical, and Golden Agri-Resources who had already done so in 2015. HGrievance procedures and consistent engagement on suppliers’ compliance will gradually help reduce that exposure to generally acceptable levels.

Author: Chain Reaction ResearchChain Reaction Research conducts sustainability risk analysis for financial analysts and investors. Our special focus is on sectors that deal with environmentally intensive commodities, especially those sourced from tropical regions like palm oil, and pulp and paper.
We explore whether unsustainable corporate practices and actions have introduced unreported risks – and how or whether sustainability leadership can mitigate those risks and possibly provide competitive advantage. Where possible, we provide pre-IPO checking of claims about risk and assets reported in prospectuses. We also review claims made by publicly traded companies.
Chain Reaction Research has received support, in part, from the David and Lucille Packard Foundation, and from the International Climate and Forest Initiative (NICFI) scheme managed by the Norwegian Agency for Development Cooperation (Norad). Chain Reaction Research statements and materials do not necessarily reflect the standpoints of the Packard Foundation or Norad.